Steve Jobs Was Wrong

A Nexus 7 shown at the Google Developers Conference on June 27 in San Francisco, California. The tablet will go on sale next month for $199 and will run on the latest Android Jelly Bean OS.

Photo by Mathew Sumner/Getty Images.

In the fall of 2010, Steve Jobs made an unusual appearance on an Apple earnings call. He’d come to rant. The CEO had prepared a nine-minute broadside against Android, Google’s mobile operating system, and all of the Android tablets that were being rushed into production to take on the iPad. Many of those devices carried 7-inch screens, making them substantially smaller than the iPad, whose display is nearly 10 inches diagonally.

Jobs thought 7-inch tablets were too small. Apple’s user testing had revealed that “there are clear limits of how close you can physically place elements on a touchscreen before users cannot reliably tap, flick, or pinch them,” Jobs said. As a result, these tiny tablets would need to be sold with sandpaper, he predicted, “so that the user can sand down their fingers to around one-quarter of their present size.” He wasn’t finished: Because most tablet owners also have a smartphone, people would find that these tiny tablets didn’t offer anything they couldn’t do on their phones. “The 7-inch tablets are tweeners: too big to compete with a smartphone, and too small to compete with an iPad,” Jobs said. As a result, they “are going to be DOA.”

And for a long while, he was right. Manufacturers built 7-inch tablets because shrinking the display allowed them to cut costs enough to compete with the iPad on price. And, just as Jobs predicted, the small screen was a usability nightmare—you’d try to tap one thing and end up tapping another. This didn’t have to be so. After all, you don’t make all that many tap errors on even tinier smartphone screens. But because of cheap hardware and bad software, many 7-inch tablets—including the BlackBerry PlayBook and the Dell Streak 7—totally sucked. Last year, Amazon attempted to change all that with its own 7-inch tablet, the Kindle Fire. That device was just as buggy as every other small tablet, but many people (myself included) argued that it made up for its problems with one overriding advantage: At $199, it was super-cheap. I believed the Fire was 70 percent as good as an iPad. Since it was only 40 percent of the iPad’s price, I thought it was a great deal.

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Now Google has done Amazon one better. The search company worked with the hardware maker Asus to create a super-cheap 7-inch tablet that isn’t buggy. In fact, the new tablet, called Nexus 7, is pretty fun. Over the last couple days, I’ve managed to use it for pretty much everything I do on my iPad: watching movies, reading books, browsing the Web, scanning email and Twitter, looking at photos, and playing games. For the most part, I found the experience quite pleasant.

Sure, it’s not perfect. The Nexus 7 runs Google’s latest version of Android, which I continue to find a bit cluttered and challenging for novices. It’s also not nearly as fast as the iPad. It takes longer to load up Web pages, and you can’t scroll or zoom as fluidly as on Apple’s tablet. Its screen resolution, while perfectly satisfactory, isn’t anywhere near as dreamy as Apple’s Retina display. Plus, there aren’t as many tablet-optimized apps available for the Nexus 7 as you’ll find on the iPad.

But these are all quibbles. The Nexus 7 proves Steve Jobs was wrong. Google has built a 7-inch tablet that doesn’t require you to sand down your finger: When you tap its screen, you’ll hit exactly what you intended. Like the Kindle Fire, the Nexus 7 is $199. But unlike Amazon’s tablet, the Nexus 7 won’t induce screen-tap rage. As a result, it’s the best entry-level tablet on the market. I’d recommend it for anyone who wants a cheap, portable device for completing a few basic tasks. It’s not an iPad killer, but it’s certainly a Fire killer—and if Google markets it well, it could sell a ton.

But there’s one big problem with Google’s small tablet: It lacks a business model. As Amazon did with its Fire, Google is selling the Nexus 7 at cost. Amazon could afford to do so because the Fire is a gateway to its online store. After you get the Fire, you’ll buy a lot of books and movies from Amazon, and you might even become a subscriber to Prime, Amazon’s highly profitable subscription service.

But Google, unlike Amazon, doesn’t sell physical stuff, so it can’t justify the low price of the Nexus 7 on the expectation of huge e-commerce sales. Sure, the search company does sell media—you can buy books, music, and subscribe to magazines from the Nexus, but the selection is thin compared with what’s available in Amazon or Apple’s media stores. If you get a Nexus 7, you’re better off relying on other sources for media. For books, install the Kindle app and buy from Amazon. For movies, use the Netflix app. For music, use Spotify.

Well, what about advertising? Google makes most of its money from ads, and boosting advertising revenue is the central goal behind Android. The more Android devices Google sells, the more people use its services, and thus, the more people see its ads. So if Google sells a lot of Nexus 7s, couldn’t it make a lot more money from ads?

Not really. Google makes only about $4 per year in ad revenue from every Android device, according to an analysis by Asymco’s Horace Dediu. So if Google sells 10 million Nexus 7s—far more than anyone expects—it would make $40 million a year from the device. For a company that made nearly $12 billion in profits last year, that’s nothing to crow about. (What’s more, two-thirds of Google’s mobile advertising revenue comes through Apple devices. If people choose the Nexus 7 over the iPad, Google might not be making any more money than it would have anyway.)

Google’s real goal with the Nexus 7 can’t be to make money. Instead, the tablet is a marketing device. Google wants to hop on the tablet train before it’s too late. It’s been two years since the iPad was released, and so far no one has managed to create a plausible alternative. The Nexus 7 is an effort to get people to believe that Android tablets aren’t terrible. It’s good enough to be usable for most people, and just cheap enough to get a lot of folks to give it a try. And if you get the Nexus 7 and find that it isn’t so bad, maybe one day you’ll be willing to give other, not-so-cheap Android tablets a try.

It’s a circuitous plan, and it could well fail. In the meantime, though, you might as well enjoy Google’s pretty good, cheap tablet.

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